USD/CAD directionless around mid-1.23s in choppy session
After recording its fifth straight daily gain yesterday, the USD/CAD has gone into a consolidation phase and has been trading in a narrow 40-pip channel on Thursday. As of writing, the pair was at 1.2348, adding 0.19% on the day.
The macro data from the U.S. failed to help the greenback gather further strength against its peers. Although weekly jobless claims and Philly Fed Manufacturing Index both beat the market estimates, they were largely ignored by the participants. The US Dollar Index, which jumped to a weekly high at 92.50 following the hawkish FOMC statement, is now at 92.12, losing 0.1% on the day. However, today's movement seems to be a technical correction, and the index is likely to gain traction in the near-term as long as it remains above the 92 handle.
- US: Weekly initial claims was 259,000, a decrease of 23,000 from previous week
- Philly Fed: Index for current manufacturing activity in the region increased 5 points to 23.8
On the other hand, the price action of crude oil remains fairly subdued, not providing any directional hints for the commodity-sensitive loonie. As of writing, the barrel of West Texas Intermediate is at $50.60, down only 6 cents.
On Friday, the economic docket from Canada will feature the retail sales and the CPI data. On a monthly basis, consumer inflation in Canada is expected to rise by 0.2% after staying unchanged in July. An upbeat CPI reading could help the CAD start correcting its losses against the buck. However, with heightened expectations of a Fed December rate hike, the DXY is likely to continue to be the primary driver of the pair's movements.
Technical outlook
The RSI indicator on the daily graph is moving sideways near the 50 mark, supporting the view of a short-term neutral outlook. The pair could encounter the first technical hurdle at 1.2410 (Sep. 6 high) before 1.2460 (50-DMA) and 1.2500 (psychological level). On the downside, supports could be seen at 1.2280 (20-DMA), 1.2200 (psychological level) and 1.2120 (Sep. 15 low).
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
